Development Challenges in the Indian Economy

This article discusses the challenges faced by the Indian economy in achieving full development, including environmental degradation, governance issues, and political capabilities. It also explores the demography, geography, and topography of India, as well as its economic performance and future opportunities. The constraints and socio-cultural determinants of economic development are also examined.

Development Practise
Students Name
Institution

India 1
Introduction
Worth noting, India is one of the fast-growing Asian economies. However, despite the
opportunities for growth, challenges, topographical and geographical advantages, the Indian
economy is yet to fully develop. Additionally, the availability of natural resources such as
tourists sites has contributed to the Indian gross domestic product. Among the factors such as a
youthful labor force, low wages and technological advancements have contributed to the
economic development of the Indian economy. Some of the challenges include governance and
political will. Unfortunately, social-cultural issues such as caste, religion, education have played
a role in the entrepreneurial culture of the Indian economy. Imperatively, economic development
depends on the stability of macroeconomic factors, governance structure, currency appreciation,
and political will to sustain economic development Among the constraints to economic
development in India are the social-cultural factors, high and inefficient energy costs and
inadequate infrastructure. Despite all these challenges, the Indian economy is bound to grow
according to IMF forecastings.
India’s Demography, geography, and topography
Notably, India is situated on the Northern Indo-Australian region. Basically, the Indian
geography is mad eup of snowy mountain ranges, range of deserts, hills, and series of
plateaus. On a topographical front, the Indian landscape is identified by the Himalayas,
Peninsular plateau, Northern Plains, Coastal plains as illustrated in the image below (Maps of
India, 2019). These geographical regions are key tourist attractions for the country hence raising
revenue to the Indian gross domestic product growth. According to recent demographic statistics,
the Indian population was estimated to be 1,281,935,911 as of July 2017(Indexmundi,2018). It

India 2
is estimated that the population level grew by 1.17 percent in the year 2017. Overall, India‘s
population is male-dominated. However, the female median age is higher than the male's median
age. Worth noting the Indian population life expectancy rate stands at 67.6yr for men and 70.1
years for women as at the year 2017(Index Mundi.com,2018).
Maps of India . (2019). Topography of India. Maps of India .com.Online Image .Retrieved from
https://www.maps ofindia.com/maps/india/topographic-map.htm
Key development challenges
Worth noting, the Indian economy was ranked 177/180 in Environmental Performance Index
conducted by the World Economic forum alongside the Universities of Yale and Columbia (PTI,
2018). Specifically, India was ranked second last as to air quality thus making India among the
most polluted countries. In a way, environmental degradation leads to depletion of natural
resources and affects the health and wellbeing of the labor force thus affecting economic
outcomes. Due to air and other forms of pollution, life expectancy rates and workforce health
care /wellbeing will be affected by diseases and deaths which reduce the healthy labor

India 3
participation required to engage in economic development activities. According to the Indian
Institute for health metrics and Evaluation report of 2017, PM 2.5 death incidences have been on
the rise and the same is estimated to be 1,640,113 deaths yearly. Also, the report observed that
air pollution was responsible for two-thirds of the deaths in the Indian economy thus reducing
the labor market participation rate. It is important that the Indian government puts into place
measures to eradicate carbon emissions to curb ills and death related to air pollution for a healthy
and productive labor market.
Governance and Political capabilities
Noteworthy, the Indian political landscape is federal and parliamentary in nature. Similar
to all economies, political will play a critical role in the formulation, implementation, and
achievement of economic development goals. Due to the lack of transparency and accountability
systems in the public sector, the implementation of economic policies for the wellbeing of
Indians has been cut short. There has been massive corruption in public procurement and
expenditure leading to low economic outcomes for the Indian citizens. Also,lack of professional
and educational qualifications to handle public service offices has led to poor economic and
social outcomes for the economy. It is important that qualified staff be appointed to run public
services for the benefit of all citizens. Also, there is a need for transparency and accountability
mechanisms in public procurement and investment for better economic outcomes for all.
Arguably, the weak macroeconomic conditions of the Indian economy can be attributed to poor
policy and decision making on the part of the Indian government. Worth noting, monetary and
fiscal policy formulation and implementation are the responsibilities of the Indian government
through its agencies and institutions.

India 4
In addition, the fact that the Indian macroeconomic conditions are not stable is an indication
of policy failure on the part of the Indian government and its agencies(Singh,2013).In recent
years, India has experienced high inflation rates which could be rectified by contractionary
monetary policies by the relevant institution. Also, the fact that politicians pass legislation that
affects economic ventures through licensing and taxes makes their role in economic development
vital(Asher & Novasad,2017). Usually, politicians legislate registration requirements for firms,
pass anti-trust laws to encourage competition among market players and legislation on the tax
regimes for corporate and personal income thus affecting investment decisions. All these
entrepreneurial activities are affected by legislation put in place by politicians in India. In all
economies, the business environment is regulated by the government. Most governments
regulate business through regulatory frameworks such as licensing, work permits, inspection, and
tax regimes. In the event that the Indian government provides simpler business qualifications and
operations requirement, small businesses will expand and create more employment opportunities
and raise more revenue hence fostering economic independence.
India ‘s Economic performance
In recent years, the Indian economy has experienced high inflation rates and slowed
economic growth rates(Riley, N.d). As depicted in figure 1 below, the Indian inflation rate has
been on the rise between January 2018 and July 2018. These high inflation levels have led to low
investment levels and consumption levels for commodities and services hence the slowing
economic development rate. Also, since the month of January 2019, the inflation rate has risen
from 2 percent to 3 percent( Trading Economics,2019). This goes to show high prices for goods
and services. The fact that the Indian economy suffers from persistent trade deficits and fiscal

India 5
deficits affirm the notion that the Indian economy is struggling to develop. It is estimated that
Indian exportation of goods and services amount to 15 the percentage of the country is a gross
domestic product. Majorly, one-third of the Indians live below the poverty line thus an indication
of slow economic development.It is important that the economy generates more export goods
and services to prevent a capital account balance deficit. In the event that India imports more
than it exports, a capital account shortage is likely to occur.
Trading Economics.2019.India inflation rate. Graph Retrieved from
https://tradingeconomics.com/india/inflation-cpi
Priorities
Noteworthy, for the Financial year 2019, the Indian government is focused on the revival of
economic growth rate while maintaining the stability of other macroeconomic indicators.
Compared to the past 3 years, the Indian macroeconomic factors have risen. Additionally, the
Indian government aims to lower the budgetary deficit from 5 percent to 3.5 percent of the

India 6
country’s gross domestic product(Rao et.al,2019). Also, the Indian government has set a 3
percent target on fiscal consolidation to stir economic development. Higher US bonds are part of
the 2018-19 Indian economic expectations. As at the year 2014, the Indian government priorities
included fiscal policy tightening,anti-inflation measures, improving the country's current account
deficit and easing up the Indian business environment(Harjani, 2014).
Opportunities
Despite the fact that 1/3 of Indians live below the poverty line, there is room for economic
empowerment for the Indian population due to supply-side economic factors such as rapidly
growing age working population bracket(Riley, N.d). Worth noting, Indian has a seven hundred
million population of age working citizens which has increased the working age group from 58%
to 64%( Riley, N.d).In addition to the working age group increase, the Indian economy is a
magnet for foreign investment due to a sound legal structure and English language as a
communication medium. Also, there is an increase in the productivity gap. Further, the low
wages in India are able to provide employment opportunities for most of its population(Riley,
N.d). Usually, high wage growth rates are likely to lead to high wages to which most employees
will be laid off. Also, due to the recent rise in per capita income, there is bound to be an increase
in investment due to the possible doubling of per capita income(Nasayan, N.d). As illustrated in
figure 2 below, the Indian per capita income has been rising over the years( Trading
economics,2019). Worth noting, the rise in per capita income is a sign of economic development
due to the increase in income levels.

India 7
Trading Economics,2019. India GDP Per Capita Trading Economics Graph.Retrieved from
https://tradingeconomics.com/india/gdp-per-capita
Owing to the rising consumption levels in India the likelihood of it rising to a middle-class
economy is guaranteed( Tedeneke,2019). It is estimated that the Indian consumption rate of
goods and services is rising from 1.5 trillion US dollars to 6 trillion US dollars by the year
2030( Tedeneke,2019). Worth noting, the Indian economy, is considered the third largest
consumer of global commodities and services after China and the United States of
America( Tedeneke,2019). Also, due to the dynamic cluster of Indian businesses, the Indian
economy is bound to grow abundantly thus providing employment opportunities and increasing
incomes leading to economic development. Due to the incorporation of technology to the Indian
business landscape, employment outsourcing has been effectively implemented thus generating

India 8
employment and revenue for the Indian population. According to IMF forecasting, India is
better placed to grow faster economically due to low oil prices and slow monetary tightening as
depicted in the Figure below (Business Line,2019). Overall, India is growing fast economically
due to the rapid growth of the labor force, favorable macroeconomic conditions and high
consumption levels of commodities and services.
Businessline,2019). At 7.5%, 7.7% India to be top growing economy in 2020:
IMF.Businessline.com. Image.Retrieved from
https://www.thehindubusinessline.com/economy/indian-economy-poised-to-pick-up-in-2019-
says-imf/article26051905.ece
Constraints
However, India’s economic growth rate is curtailed by low capital investment shares as a
share of the gross domestic product. Usually, investment propels economic activity due to the
creation of employment opportunities, development of infrastructure and providing income for
the population. Also, poor communication and transportation infrastructure has discouraged

India 9
expansion of business ventures thus slowing down the rate of economic growth. Further, the
Indian economy has a weak human capital index due to the existence of small enterprises
requiring lowly skilled workers. According to a recent world bank Group report, the Indian
economy is power inefficient thereby increasing the poverty gap. Specifically, India ‘s power
inefficiency costs 4% of the Indian GDP annually equivalent to eighty-six billion US dollars
(World Bank Group,2018). Based on the findings of the 2018 Global competitiveness report,
India ranks 80 /137 in electric supply reliability hence the assertion that much needs to be done
to improve.
Freedoms and Unfreedoms
Notably, the human capabilities approach to development advocates for the universal
application of certain rights to all human beings. Worth noting the sustainable development goals
stipulate the basic human rights such as right to food, poverty eradication, right to health care,
water among other substantive rights. Substantially, lack of basic human rights is directly linked
to poverty which eradicated the right to food, shelter or clothing( Ragged University,2014).
According to sustainable development goals, development is viewed as an effective way of
promoting development. Basically, economic development is aimed at bettering the economic
wellbeing of individuals and a country as a whole hence the implementation of SDGs to prevent
hunger, poverty, good health outcomes, access to education, access to clean water, gender
equality among other freedoms(United Nations.Org,2019).The lack of guaranteed freedoms such
as the right to equal opportunities despite gender, age, caste or religious considerations which
lead to income equality thus fostering economic development among the Indian population

India 10
collectively. Oftenly, discrimination at the workplace has derailed income equality among
gender and caste in India.
Socio-cultural determinants of wellbeing.
Undoubtedly, India is one of the culturally rich economies in the world hence it is no
wonder that it affects its entrepreneurship and economic outcomes. On the social front, factors
such as the background of families, educational qualifications, religious status, caste, social
background, and social networking have affected the entrepreneurship trends in the Indian
economy (Bhoganadam & Dasaraju,2015).In addition to social factors, Indian culture has played
a shaping role in economic activities. Primarily, culture entails religion and caste in the Indian
context. Sadly, culture determines the employment opportunities for part of the Indian population
Specifically, members of lower caste in the Indian population are faced with stigma thus denying
then equal economic and social empowerment opportunities like higher caste members
(Hoff,2016).In a way, the caste system is discriminative when it comes to economic
opportunities for lower caste members thus slowing down the process of economic development
and freedoms.
Conclusion
Overall, the Indian economy is among the first growing economies in the world right now.
The growth of the economic development in Indian is due to a vibrant working age group, lows
wages, high consumption patterns, technological advancements, and favorable entrepreneurial
legislation. However, there are various challenges such as governance inadequacies, lack of

India 11
qualified labor force, inefficient energy supply, and physical infrastructure to propel economic
development. Worth noting the Indian government is committed to the implementation of
economic goals through its commitment to sustainable development goals which provides
various substantive freedoms which are key to economic development. According to the human
rights capabilities approach, the observance of fundamental human freedoms is a massive
contribution to economic empowerment. It is imperative that the Indian government improve its
transport and communication infrastructure, encourage professional education for its labor force,
improve the ease to access electricity supply and other challenges so as to fully develop the
Indian economic welfare.

India 12
References
Arjani, A.(2014).The Top 4 Priorities for India’s new government. Retrieved from
https://www.cnbc.com/2014/05/16/the-top-4-priorities-for-indias-new-government.html
Asher, S & Novasad, P.(2017). Politics and Local Economic Growth: Evidence from India†.
American Economic Journal: Applied Economics, 9(1), 229-273
Bhoganadam, D.S. & Dasaraju, R.S. (2015). A Study on Socio-Cultural Factors Influencing
Indian Entrepreneurship: A Critical Examination. International Journal of Applied
Engineering Research, Vol 10(23): 43807-43812
Hoff, K. (2016).Yes, culture matters for economic development. Retrieved from
http://www.worldbank.org/en/news/feature/2016/03/28/yes-culture-matters-for-
economic-development
Index Mundi. (2018).India Demographics Profile. Retrieved from
https://www.indexmundi.com/india/demographics_profile.html
Maps of India. (2019).The topography of India. Retrieved
fromhttps://www.mapsofindia.com/maps/india/topographic-map.htm
Narayan, S. ( N.d).India’s economy: Constraints to inclusive growth. Asian Journal of Public
Affairs.Vol.2, No.1.p9 8-11

India 13
PTI. (2018, Jan 24). India ranks 177 out of 180 in Environmental Performance Index. Economic
Times of India. Retrieved from
https://economictimes.indiatimes.com/news/economy/indicators/india-ranks-177-out-of-
180-in-environmental-performance-index/articleshow/62637626.cms
Ragged University. (2014). Development as Freedom: The Human Capabilities Approach.
Retrieved from https://www.raggeduniversity.co.uk/2014/05/10/development-freedom-digest-
alex-dunedin/
Rao, R., Wee, P, Leow, E & Goh, J.(2019). India in 2018/19: Balancing priorities. Retrieved
from
https://www.dbs.com/aics/templatedata/article/generic/data/en/GR/112017/171128_insig
hts_india_in_201819_balancing_priorities.xml
Riley, G. (N .d).India-Economic Growth and development. Retrieved from
https://www.tutor2u.net/economics/reference/india-economic-growth-and-development
Singh, C. (2013). Economic growth cannot be taken for granted: Need for urgent reforms – an
interview with Dr. A. Virmani: Former Executive Director, International Monetary Fund
and Former Chief Economic Advisor, Government of India. Retrieved from
https://www.sciencedirect.com/science/article/pii/S0970389613000827
Singh,P.B.(N.d). The Challenge of Good Governance in India: Need for Innovative Approaches.
Retrieved From http://workspace.unpan.org/sites/Internet/Documents/Challenges%20for
%20Good%20Governance%20in%20India.pdf
Trading Economics. (2019).INDIA GDP per capita. Retrieved from
https://tradingeconomics.com/india/gdp-per-capita

India 14
Trading in Economics. (2019).India Inflation rate Retrieved from
https://tradingeconomics.com/india/inflation-cpi
United Nations. (2019).About sustainable development goals. Retrieved from
https://www.un.org/sustainabledevelopment/sustainable-development-goals/
Weforum. (2019). Challenges and Opportunities Emerge as India Becomes Third-Largest
Consumer Market by 2030. Retrieved from
https://www.weforum.org/press/2019/01/challenges-and-opportunities-emerge-as-india-
becomes-third-largest-consumer-market-by-2030/
World Bank Group. (2018). Power Sector Distortions Cost India Billions. Retrieved from
https://www.worldbank.org/en/news/feature/2018/12/17/new-report-power-sector-
distortions-cost-india-billions